Herman Van Rompuy, the European Council president responsible for summoning EU leaders to summits, is determined to go ahead with this month's gathering on the bloc's 1 trillion euro seven-year budget – despite UK parliament demands for cuts that make an agreement unlikely.
John Thys | AFP | Getty Images
Mr Van Rompuy is weighing whether to seek a compromise with David Cameron, the British prime minister, or isolate the UK by striking a deal with the other 26 EU members. Most of them have shown more flexibility towards slight budget increases, said officials briefed on the matter.
"Will you take the British position into account, and really disappoint the other member states, hoping Cameron signs on, or will you just decide the UK is out of it and reach a deal at 26?" said one official familiar with Mr Van Rompuy's thinking.
(Read More: ECB's Knot Backs German Call for Budget Commissioner)
Other EU countries have raised concerns about drafts of the blueprint for the 2014-20 budget, including Sweden and the Netherlands, which have both objected to the limited cuts included in a compromise proffered by lead negotiators last week.
But even governments sympathetic with Britain are open to some compromise on the size of commitments contained in the budget.
British demands for a freeze amount to an approximately 200 billion euro cut from an original €1,033bn proposal made by the European Commission this year. A German compromise plan is close to the UK line but Britain had suggested that it was not enough, even before the UK parliament took its stand.
The increasingly hardline stance taken by Britain has begun to sour opinion in other EU countries against UK stances on unrelated issues, according to senior bloc officials, including protections for the British financial sector sought during the debate over a eurozone banking union.
EU diplomats said there was a growing consensus among several member states to stand firm against British plans to "opt in" to EU-wide justice and policing policies – including the European arrest warrant. London has suggested that the UK would try to opt back into certain areas of co-operation after exercising an option to pull out of EU home affairs policies next year.
"The UK's ability to influence EU budget negotiations is like what we've seen with eurozone crisis management – namely limited," said Mujtaba Rahman, a former British Treasury official who analyses European issues for the Eurasia Group risk consultancy. "There's a certain amount of schadenfreude among other member states with the UK's current status in Europe."
(Read More: EU Could Rewrite Eurozone Budgets)
Without a deal at the two-day summit starting on November 22, it remains unclear when agreement on a new budget could be reached. Some have suggested another attempt at a December summit but many diplomats believe there would have to be a longer "cooling off" period for positions to soften again.
"We have other things to do at the December summit," said one EU official involved in summit planning, noting that decisions on banking union and the future of the eurozone were due to be debated at next month's meeting.
Without a deal soon, the EU would be forced to continue next year's budget into 2014, including a rise for inflation – meaning Britain and other net contributors would actually see their contributions increase.